Notice Under Section 148 Of Income Tax Act Against A Struck-Off Company Valid, In View Of Subsequent Order Of NCLT Restoring The Company: Delhi High Court

The Delhi High Court has ruled that the order passed by NCLT under Section 252(3) of the Companies Act, 2013, directing restoration of a struck off company, will have the effect of placing the company in the same position as if the name of the company had not been struck off from the register of companies. Thus, the Court held that the notice under Section 148 of the Income Tax Act, 1961 issued against a Company on the date it stood dissolved as a consequence of being struck off, was valid in view of the subsequent order passed by the NCLT. The bench of Justices Manmohan and Manmeet Pritam Singh Arora noted that the continuing liability of a struck-off Company envisaged under Section 250, is in addition to Section 248(7) of the Companies Act, which provides that the liability of every director or manager of a company dissolved as a result of being struck off, shall continue and may be enforced as if the company had not been dissolved. The petitioner- Ravinder Kumar Aggarwal, is the director of RKA International Pvt. Ltd. Due to the defaults committed by the Company, certain proceedings were initiated by the Ministry of Corporate Affairs through the office of the Registrar of Companies (ROC), and the Company was struck off by the ROC from its register of companies, under Section 248 of the Companies Act, 2013. Thereafter, a notice under Section 148 of the Income Tax Act, 1961 was issued against the Company, against which the assessee filed a writ petition before the Delhi High Court. The assessee- Ravinder Kumar Aggarwal, submitted before the High Court that the said notice issued under Section 148 of the Income Tax Act was null and void since it was issued in the name of a struck off company. The revenue department averred that the Company was active during the relevant assessment year in which it had failed to file its income tax return and that an amount had escaped assessment for the said assessment year. Therefore, it contended that it was a fit case for issuance of notice under Section 148. The department added that after the notice under Section 148 was issued, the National Company Law Tribunal (NCLT) passed an order allowing the petition filed by the Income Tax Department under Section 252 of the Companies Act, 2013, thereby restoring the name of the Company in the register of companies. To this, the assessee submitted that the date on which the notice under Section 148 was issued, the Company's name was struck off from the registrar of companies. The assessee argued that the subsequent order passed by the NCLT restoring the name of the Company, would not cure the defect of issuance of notice under Section 148 in the name of a non-existent Company. The revenue department argued that the Income Tax Department had filed an appeal for restoration of the Company's name prior to the issuance of the notice under Section 148. It averred that the restoration related back to the date of striking off and thus, the notice did not suffer from any infirmity. The Court noted that the said Company had not challenged the notice issued under Section 148, nor had it filed an appeal against the order passed by the NCLT, therefore, the same had attained finality. Referring to Section 252(3) of the Companies Act, 2013, the Court observed that the order passed by the Tribunal, directing restoration of a company, will have the effect of placing the company in the same position as if the name of the company had not been struck off from the register of companies. Thus, it ruled that in view of the restoration order passed by NCLT, on the date of issuance of the Section 148 notice, the Company would be deemed to be in existence. The bench further noted that Section 250 of the Companies Act recognizes the continuing liability of a struck off company. It added that in view of Section 250 of the Companies Act, even where a Company is dissolved in consequence of being struck off under Section 248, it shall be deemed to continue to be in existence for the purpose of discharging its liabilities. The Court added that the continuing liability of a Company envisaged under Section 250 is in addition to Section 248(7) of the Companies Act. Section 248(7) of the Companies Act provides that the liability of every director, manager or other officer who was exercising any power of management, and of every member, of the company dissolved in consequence of being struck off under Section 248, shall continue and may be enforced as if the company had not been dissolved. While noting that the repealed Section 560 of the Companies Act, 1956 corresponded to Section 248 of the Companies Act, 2013, the Court referred to the decision of the Supreme Court in Commissioner of Income Tax, Jaipur versus Gopal Shri Scrips Private Limited, (2019). In the Gopal Shri Scrips (2019), the Supreme Court, after referring to proviso (a) of Section 560(5)...

Notice Under Section 148 Of Income Tax Act Against A Struck-Off Company Valid, In View Of Subsequent Order Of NCLT Restoring The Company: Delhi High Court

Parina Katyal

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